Logitech up on Microsoft bid talk, analysts wary

Logitech up on Microsoft bid talk, analysts wary

ZURICH (Reuters) - Shares in Swiss-based computer peripherals maker Logitech International SA rose as much as 12 percent on Thursday based on speculation Microsoft Corp would launch a takeover bid, traders said.

Analysts dismissed rumors of an $8 billion takeover bid as unlikely and Logitech board member Daniel Borel, the company's largest shareholder, said he had no reason to sell his 6 percent stake. He declined to comment on the speculation.

Such a deal would be Microsoft's biggest ever and while the world's largest software maker has recently shown a willingness to do bigger deals, it has focused most of its acquisitions on higher-margin Web and business software.

"I am a co-founder of Logitech. Would you be willing to sell your child?" Borel told Reuters in an interview.

"I have no reason to sell. But I will not be the one to decide. I own only some 6 percent so I will neither enable nor prevent a sale of Logitech."

Traders said rumors circulated that Logitech, with a market capitalization of about 7 billion Swiss francs ($6.3 billion), would receive a takeover bid at 48 francs per share from Microsoft.

This would be a premium of 38 percent to Wednesday's 34.80-franc closing price and value it at 9.16 billion francs.

"Rumors are rumors. I can't make any specific comment on them," Borel said.

A Logitech spokesman declined to comment. Microsoft said it does not comment on rumor or speculation.

A Logitech takeover would make the software leader the world's largest maker of computer mice and other peripheral devices as well.

"It seems out of left field. Microsoft has a small decent hardware business, but I don't see why it would do this," said Morningstar analyst Toan Tran.

Last year, Microsoft completed its biggest acquisition, paying $6 billion for digital advertising firm aQuantive.

Shares in Logitech pared gains later in the Zurich session and closed 5.8 percent higher at 36.70 francs. Microsoft shares fell 14 cents to $34.30 in afternoon Nasdaq trading.

HARDWARE

Logitech is the market share leader in PC mice, a market it has shared over the years with Microsoft which so far has showed little interest in using its market power to dominate a hardware segment such as this.

But Microsoft has established a large market for hardware with its Xbox entertainment console and Logitech's accessories would dovetail with this new segment.

"Microsoft is above all a software company -- it is a very, very large company and only in a couple of 'small' fields we compete with each other," said Borel when asked whether Microsoft would be a good partner for Logitech.

Logitech also manufactures a wide range of computer accessories, including Webcams, speakers and keyboards.

The entry of Microsoft into the Webcam market dented sales at Logitech, whose products also include remote controls.

Some market participants played down the possibility of a bid.

"Today's share price rise is probably more related to a rebound in the market than any rumors," said Michael Foeth, analyst at bank Vontobel, which rates Logitech a "buy."

"Logitech has lost almost 20 percent since the start of the year," said another Zurich trader. "Now they're covering shorts. The rumors are just a bunch of talk."

With a price-earnings ratio of 18.8 on forecast 2008 earnings, Logitech is already one of the most expensive firms in the Dow Jones index of European tech shares.

Logitech reports fiscal third-quarter results on January 17.

(Additional reporting by Katie Reid, Peter Maushagen, and Rupert Pretterklieber in Zurich, Daisuke Wakabayashi and Eric Auchard in Las Vegas; Editing by Paul Bolding and Braden Reddall)

($1=1.116 Swiss Franc)

REUTERS